Impact of pension reforms on divorce

Before 2000, if a divorcing spouse wanted a share of their ex-spouse’s pension the only way this could be achieved was through a Pension Earmarking Order (PEO).

This type of order could allow a spouse to receive a fixed percentage of the pension income their ex-spouse would receive on retirement.  The courts soon found unfairness in these types of orders and, since 2000, if spouses are going to have share of the other’s pension this is now usually done through a Pension Sharing Order (PSO).

A PSO allows the pension company to transfer a percentage of one spouse’s pension out of the scheme and into a completely different scheme in the other spouses name. This way each spouse has their own distinctive pension pot that they can then choose to build up over the rest of their working lives. When each spouse comes to retire they can then choose what to do with their pension without worrying about what their ex-spouse is going to do with theirs.

However, experts are warning people that if their divorce was finalised before 2000 and they have a PEO, they must check whether their rights are protected in light of the recent pension reforms. If their ex-spouse decides to withdraw all their pension as cash and not take a pension income, the spouse may not receive their correct entitlement under the PEO.

Anyone who has a PEO in their favour should check the wording carefully and, if there is any concern, expert advice should be sought on their current position and what can be done to resolve any issues arising from these pension reforms.

If you need advice, our friendly and experienced solicitors are on hand to help. Call the team on 01473 611211 or email [email protected]

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